March 17, 2015

From “acqui-hire” to acquisition

One of the most under-discussed types of acquisitions is the "acqui-hire." These are generally defined as purchases where a larger company buys a smaller company not for its corporate structure or financial position, but because it possesses a strong team that could be useful to realizing bigger goals. 

"Instead of buying companies for their products, or even potential financial contribution, acquirers who are leading the acqui-hire movement are now purchasing teams of smart people (generally engineers) who have a history of working well together with the hope that dropping in these teams might accelerate and advance their own businesses," explains CB Insights. 

The blog explains that acqui-hires can be a "soft landing" for companies with interesting concepts and qualified talent that can't quite make it in their space. Instead of accepting failure, these small firms can market the strength of their ideas and technical finesse to buyers. In the long run, this can be cheaper and more efficient than attempting to poach or collect individuals from a strong team after a company has folded. 

When large companies can afford it, investing in an acqui-hire can be a cost-effective way to procure professionals for a team. This has been a particularly effective acquisition strategy for companies that needed to build out their mobile arm, either for public-facing applications or other functionalities. Perhaps a small mobile startup is on the verge of failure, lacking the resources and support to survive on its own. Absorbing those key players can reduce the research and development time a larger firm requires to meet its expansion goals. 

With a M&A advisor, your company can determine whether it's in a position to market itself for an acqui-hire and other sorts of M&A deals in the tech space.